KUALA LUMPUR, Feb 6 — The government plans to establish a National Health Fund (NHF), including “targeted” contributions from employers and employees, as early as this or next year to help finance the public health care system.
Health Minister Dzulkefly Ahmad made the announcement at the Forum Ekonomi Malaysia (FEM) 2026 organised by the Economy Ministry here yesterday.
“For us to have a National Health Fund that is truly going to be more sustainable and a bit more future-proof, particularly for the public health system, which is essentially getting the diversified funding sources from not only the government allocation, [but also] phased contribution – targeted employer-employee – industry inputs, trust funds, and earmarked sin taxes,” said Dzulkefly in closing remarks during a panel discussion on health care reform at the conference.
“All those, you know, we leverage on to get a semblance of a National Health Fund that would really make this, moving forward, truly a ring-fenced National Health Fund designed to pool and manage health financing more strategically, so that you can do strategic purchasing and what not, beyond heavy reliance on annual budget allocation per se.”
The health minister explained that the NHF would act as the “financing backbone” of the government’s Reset strategy.
“I would want to remind of our earnestness, conviction to have the National Health Fund in place. Soon as within ‘26, ‘27, we want to see this coming through.”
Dzulkefly did not specify if contributions from employers and employees to the NHF would be mandatory, nor the suggested rate or the proposed individual income bands from which contributions will be collected.
This is the first time that the government has talked about getting working adults and their employers to contribute to the NHF; previously, Dzulkefly only mentioned the earmarking of pro-health tax revenue for the fund like alcohol, tobacco/vape, and sugary-sweetened beverages (SSB).
However, the health minister told the Dewan Rakyat last month that SSB tax revenue was not earmarked for health, as the Federal Constitution requires all government revenue to be placed in the federal consolidated fund. Neither is vape tax revenue earmarked for health.
It’s unclear if legislative or constitutional amendments will have to be made and passed by Parliament – as soon as this year – not just to enable the earmarking of certain tax revenue for health, but also contributions from employers and employees to the NHF, especially if these contributions are mandatory.
It’s also unclear if the government intends to get either the Employees’ Provident Fund (EPF) or the Social Security Organisation (Socso) to collect contributions from employers and employees for the NHF, or if an entirely new statutory body will be established to manage the fund.
During the “Health Care Reform: Towards Equitable, Affordable and Quality Health Care” session moderated by Prof Dr Sharifa Ezat Wan Puteh, Dzulkefly acknowledged that as an upper middle income economy, Malaysia’s public health care spending should reach 5 to 6 per cent of the country’s gross domestic product (GDP).
“It’s always easier said. I’ve said that before. But I know how difficult it is when revenue to GDP is plateauing right? For now, if you do not allow me the resource, allow me to be resourceful,” said Dzulkefly, before going on to talk about the planned Rakan KKM “premium economy” project at the MOH.
According to the MOH’s Malaysia National Health Expenditure (MNHA) 2011-2023 released in December 2024, which is the latest data available, Malaysia’s total expenditure on health reached 4.6 per cent of GDP in 2023, comprising 2.4 per cent public and 2.2 per cent private spending.
The MOH received RM46.5 billion under Budget 2026. If the Madani government aims to increase public health care expenditure to 5 per cent of GDP before Malaysia’s next general election due by February 2028, this means that the NHF may have to boost allocations from general taxation to double MOH’s funding within just two years.
Dzulkefly also defended the government-designed Base Medical and Health Insurance/Takaful (MHIT) Plan as an “affordable” health insurance product.
“We understand that middle-income earners do not want any handouts,” he said. “Quite the contrary – what they want the government to do is to provide a good, viable insurance product.”
The health minister said the Base MHIT Plan will include creating a national electronic medical records (EMR) system and transitioning private hospitals from a fee-for-service model to the diagnosis-related groups (DRG) payment method.
“The Base MHIT is to provide an alternative for middle-income earners to be accessible to private health care and the DRG coming in this way to provide a remuneration system that provides for a kind of standardisation that no particular hospital will overcharge.
“What’s most important for us is to develop DRG. You’ve got to have private hospitals already sharing their data – clinical data, charges, billing and what not – so that we build the algorithm.”
The Base MHIT Plan isn’t underwritten by the government as it’s expected to be underwritten by participating insurance and takaful operators (ITOs). The government also isn’t providing subsidies for premiums, but is instead in talks with EPF to allow contributors to use their retirement savings to pay for the health insurance product designed by Putrajaya.
Bank Negara Malaysia’s (BNM) White Paper on the Base MHIT Plan, which is part of the government’s Reset strategy, states that the Base MHIT isn’t a social health insurance scheme, but is open to voluntary participation.
Given Dzulkefly’s remarks yesterday about employer-employee contributions to the NHF, it’s unclear if the government is now expecting Malaysians to pay for both the NHF (to increase funding for public health care), as well as the Base MHIT Plan (to access private health care).
The Galen Centre for Health and Social Policy previously called for a compulsory National Health and Social Insurance to provide complementary funding to support both health and aged care.
Galen Centre chief executive Azrul Mohd Khalib said in a statement last September that adopting a rate similar to Socso contributions (1.75 per cent of employer’s share and 0.5 per cent employee) would raise at least RM6 billion annually to complement the annual health allocation under the federal budget.
